Insurance agent/brokers working the commercial insurance trade work very hard to build their book of valued accounts. They continue that hard work to support their commission base while seeking referrals and networking for new accounts. Sometimes a surety bond or two is in the mix; but more often than not, having to deal with a surety bond request becomes a chore and something to avoid. Then there are the times when you have had a long established account that gets their surety elsewhere and oops…. the insured finds it necessary to Broker of Record their insurance business to the surety agent. In either case you are losing commission revenue.
Yes, surety can get complicated and the concept is far different than the insurance policies you deal with on a day to day basis. In Surety we call the “Insured” the “Principal” and not all applicants can get qualified to even get a quote. Surety underwriters are more like Bankers in how they review a bond request. They don’t “Bind” a bond, it is either issued or not. The bond has a third party, “The Obligee” (pronounced äbliˈ jē) that is actually the only party protected by the bond.
In fact, your client will be required to sign an “Indemnity Agreement” in order to get the Surety Bond. This indemnity agreement contractually places your client “at risk”, for any claims made against this bond. You will find that much of the Surety business is driven not by who can come in with the lowest rate; but, who can provide the fastest service with the strongest support.
You may also find, as many agents have, that the agent that controls the Surety can generally control the full account. You see, insurance policies are an overhead expense that your insured pays out in order to be able to maybe recover in the future should there be an incident that could create a claim. A Surety Bond, on the other hand, is purchased by the “Principal” to qualify for or obtain income generating business. Surety spent dollars directly track to generating income. Therefore, paying for a bond is a good thing, because the bond is used to produce profits.
So how does working with Surety increase your commission revenue? Many of your accounts that are purchasing commercial insurance can take advantage of the availability of Surety support to make more revenue while producing commission income for you. Without adding a single new account you can significantly increase your commissions by adding surety to your portfolio of business and let your customers know you can provide Surety support for what they currently have or help establish Surety support to increase their business sales.
You can use surety as a lead in for new accounts that have a healthy need for commercial insurance and Surety bonding. As discussed above, controlling Surety bonding gives a lot of leverage for writing the commercial insurance. Using Surety in this manner can provide tremendous opportunity for you to expand your account base. And lastly, providing Surety service helps strengthen your relationship with your business accounts. Not only are you working on getting them the lowest cost insurance plans; but now you are providing them Surety bonds that help add profits to their bottom line.
What kind of businesses could take advantage of having Surety support? You would be surprised by how many business types can use surety. Everyone would guess construction contractors and they would be right. The construction industry is the primary sector that uses Surety bonding throughout the various trades. That means, not only general contractors; but, specialty trades such as; HVAC companies, plumbers, framers, landscape construction companies, flooring companies, roofers, traffic control, traffic signs, fencing, sprinkler installation companies and many more. Any account that has asked for a certificate of insurance naming a public entity as an Additional Insured can be a great target.
But wait… construction is not the only business sector that needs Surety Bonding support. There are bonding requirements throughout the Service Industry as well as Supply and Supply/Install business. Examples of businesses that fit in this category include; Janitorial companies, Security guard firms, Food services, Furniture suppliers, Bus/transportation companies, School photographers, Low voltage contractors, Security camera installers, Wi fi and Audio/visual businesses, Software integration companies, Tree and landscape maintenance companies and many more.
All that being said, should every insurance agent be looking to become a Surety expert? If the world of Surety interests you and you want to become more knowledgeable, by all means look into learning more about all Surety products and their underwriting requirements. The National Association of Surety Bond Producers has a multilevel Surety school that has classes a couple of times each year. But the time and expense needed to be accomplished at all the details of Suretyship might not be the best way to go for most commercial insurance agents.
You are right to feel the Surety application process can be somewhat cumbersome and takes special knowledge. Also, many Surety companies will only work with experienced Surety professionals. But that is not a reason to avoid the opportunities out there to earn Surety commissions. In today’s competitive marketplace most businesses have become much more specialized. That is no different for our insurance industry. Many agencies find special niches for their talent. In the last decade we have seen the growth of many “Surety Bond Only” agencies. Brokering through a “Bond Only” agency gives the busy insurance agent the best of both worlds. The Surety expert at the Surety Agency that does not write insurance, can deal with all the messy Surety underwriting needs and not be a concern when it comes to competing for your accounts insurance business.
The trick is to treat the Surety Specialist as an extension of your insurance operation. Most “Bond Only” agents can blend in well by always keeping you in the loop with communications and having the billing come directly from you to your account. By being kept in that loop you can pick up, along the way, the basic information sureties need for the various Surety bond products. Look for a “Bond Only” agency that has experience handling brokered accounts and a good reputation for servicing the brokered business. The Surety agent should be a member of the National Association of Surety Bond Producers. As part of NASBP, they have adopted a set of standards for doing business.
Don’t let Surety be a stranger and take a shot at increasing your commissions… Surety Style.
About the Author:
Steven Swartz – President/CEO South Coast Surety Steve entered the surety industry in the late 1980’s. He has been in the credit/financial industry for nearly forty-five years. In 1995 Steve established South Coast Surety. South Coast Surety is a nationwide wholesale surety agency with a large staff to support its thousands of insurance brokers and direct accounts across the country. South Coast Surety is a Managing General Underwriting Bond-Only Agency with underwriting authority representing a variety of surety programs with many high-rated insurance carriers.